Economic Recovery Expected to Continue in 2012

Whether you own or operate a green hotel or not, your business is affected by economic headwinds or tailwinds. Fortunately for most in our industry, 2011 has turned out to be a good year and 2012 promises to be positive as well--unless of course something unforeseen happens. According to PKF Hospitality Research (HR), rooms revenue (RevPAR) is expected to increase 6.1 percent in the United States in 2012 after increasing 8.1 percent this year. “Hotels operating in the upper-tier (luxury, upper-upscale, upscale) segments are all forecast to achieve occupancies above 70 percent in both 2012 and 2013, which will exceed their long-term average occupancy levels,” said R. Mark Woodworth, president of PKF-HR. “Conversely, hotels in the lower-priced chain-scales will continue to achieve occupancy levels below their long-term average through 2013.”

PKF-HR is projecting the average daily rate (ADR) for all U.S. hotels to increase 4.7 percent in 2012 and another 5.3 percent in 2013. The long-term annual average for ADR growth is 2.8 percent. With occupancy levels for upper-tier hotels forecast to exceed the 70 percent level, ADR growth for these properties will exceed the ADR increases projected for lower-tier hotels. However, all chain-scale segments are forecast to surpass their long-term average annual ADR growth rates in both 2012 and 2013. PKF-HR is forecasting U.S. lodging demand to grow 2.0 percent in 2012. This is less than the annual growth rates observed in 2010 (+7.4 percent as reported by Smith Travel Research) and projected for 2011 (+4.8 percent).

“Many of our clients have been scared by the news of gridlock in Washington and the negative economic climate in Europe,” Woodworth said. “They are not pessimistic. They are cautious in setting their expectations for 2012. When we look at industry fundamentals, as well as the national economic forecasts of Moody’s Analytics, we remain quite confident that 2012 will be another favorable year of growth for U.S. hotels. However, each owner and operator needs to make sure they have a thorough understanding of the local market factors and economics that will impact their hotel. Hotel performance will be great for some in 2012, but others will continue to struggle.”